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Telegraph

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Delek bid to buy Ithaca Energy in $1.2bn deal sparks shareholder protest

Acash takeover bid for Ithaca Energy by its largest shareholder Delek Energy has sparked a shareholder protest just weeks before the start of production at its cornerstone North Sea project.

The takeover, which values Ithaca at C$841m (£517m), has the unanimous approval of the board but has also drawn criticism from a minority shareholder who claims the deal undervalues the company ahead of a boom in oil volumes from its Greater Stella field. Including debt, the deal is worth $1.24bn (£1bn).

Ithaca’s shares climbed over 10pc to 119.2p in London this morning after Delek won over the Canadian oil company with its C$1.95 or 120p a share offer, well above the target price pinpointed by analysts at C$1.60.

Shareholders may be about to miss out on the ride of their livesIndustry commentator Malcolm Graham-Wood

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Ithaca’s chairman Brad Hurtubise said premium proves the deal is an attractive opportunity for all shareholders to crystallise the company’s improving fortunes after a difficult two-year downturn. Ithaca reported a pre-tax losses of $60.6m for the first six months of 2016 but in the last year its shares, which are listed in Toronto and London, have climbed over 500pc in line with slowly rising oil prices and heavy cost cutting.

But Paul Mumford, a fund manager at Ithaca’s fourth largest shareholder Cavendish Asset Management, has strongly urged stakeholders to reject the offer.

"I anticipate lots of potential deals in the future – Ithaca’s shares have been as high as 140p a share in the past and with a further rise in oil price it could go even higher, meaning this acquisition would be relatively cheap, and Delek Group will see good payback in a short space of time.

“With a market cap of approaching £500 million I believe Ithaca has considerable long term potential so investors who are bullish of the outlook for oil prices should sit tight,” Mr Mumford added.

Industry commentator Malcolm Graham-Wood said shareholders “may be about to miss out on the ride of their lives” as oil companies begin to reap the benefit of lower costs and rising oil prices.

Ithaca chief executive Les Thomas said the company’s management has worked very hard to get the Ithaca through what has been a difficult year for oil companies but insisted that this is the peak time to sell before production begins.

Mr Thomas added that the board has not had any discussions with Delek about the future of the company’s management but does not expect job losses for the company as a whole to be a concern.

Ithaca Energy's Greater Stella oil field is expected to double the company's production volumes when it starts up next month CREDIT: ITHACA ENERGY

Delek already holds a 19.7pc stake in Ithaca and its takeover bid marks a second major move from the Israeli conglomerate to deepen its presence in the North Sea after snapping up 13.8pc of Faroe Petroleum in a £42.8m late last year.

Delek boss Asaf Bartfeld said that if  the bid is successful it will firmly establish the group as a global exploration and production company.

“The Ithaca transaction will substantially strengthen our international operational arm, and is a synergistic step to our existing activities. We believe Ithaca will contribute to our continued growth and we look forward to reinforcing and building on our status in international markets,” he added.

Shareholders are expected to receive a full proposal by the end of next month and will then have 35 days to respond.

This bid is appalling.  Ithaca's management are blatantly failing to represent shareholder interests by recommending this bid.

Ithaca are about to announce a more than doubling of production levels: are about to become one of the lowest cost oil producer in the North Sea: will establish a cental hub with FPF-1 into which numerous of Ithaca's surrounding oil fields can be fed at very low development and production cost in a recovering oil market.

The forward earnings/cash flow multiples for Ithaca is absolutely tiny.  A 10% bid premium is ridiculous, this bid is never going to go through at anything like this level.